A Bitcoin ponzi scheme mogul by the name of “Shavers” (you can’t make this stuff up) has finally managed to get US federal regulators involved in the governance of the virtual currency.

The good news is that some of the dupes who bought into the scheme might get some of their money back (shame on anyone who would give money to a hedge fund run by a guy named ‘shavers’), but the bad news is that because of this mini-Madoff Trendon Shavers, a US district judge has ruled that Bitcoin is a legitimate currency, but the courts still view it as a “non-traditional investment” which requires new levels of policing.

According to Ponziclawbacks.com here is a look at the legendary ‘Bitcoin Pirate’. Goldman Sachs, MF Global would hire him in a whip…

Did the Bitcoin-shaving Shavers ruin the party with his antics, or was this always on the cards?-RT

A federal judge has for the first time ruled that Bitcoin is a legitimate currency, opening up the possibility for the digital crypto-cash to soon be regulated by governmental overseers.

United States Magistrate Judge Amos Mazzant for the Eastern District of Texas ruled Tuesday that the US Securities and Exchange Commission can proceed with a lawsuit against the operator of a Bitcoin-based hedge fund because, despite existing only on the digital realm, “Bitcoin is a currency or form of money.”

Trendon Shavers of Bitcoin Savings & Trust (BTCST) was accused last year of scamming customers out of roughly $4.5 million worth of the cryptocurrency through his online hedge-fund. Shavers promised investors a weekly return of 7 percent, according to the federal complaint, but shut-down his site after collecting upwards of 700,000 bitcoins. When the SEC charged Shavers last month with operating a Ponzi scheme, he fought back by saying Bitcoin is not actual currency and can’t be regulated.

“The SEC asserts that Shavers made a number of misrepresentations to investors regarding the nature of the investments and that he defrauded investors. However, the question currently before the Court is whether the BTCST investments in this case are securities as defined by Federal Securities Laws,” Judge Mazzant wrote this week. “Shavers argues that the BTCST investments are not securities because Bitcoin is not money, and is not part of anything regulated by the United States. Shavers also contends that his transactions were all Bitcoin transactions and that no money ever exchanged hands. The SEC argues that the BTCST investments are both investment contracts and notes, and, thus, are securities.”

Despite Shavers’ argument, Mazzant weighed in this week with an opinion that’s not only quite the contrary, but could have widespread repercussions in the world of Bitcoin.

“It is clear that Bitcoin can be used as money,” Mazzant wrote. “It can be used to purchase goods or services, and as Shavers stated, used to pay for individual living expenses. The only limitation of Bitcoin is that it is limited to those places that accept it as currency. However, it can also be exchanged for conventional currencies, such as the US dollar, Euro, Yen and Yuan. Therefore, Bitcoin is a currency or form of money, and investors wishing to invest in BTCST provided an investment of money.”

Bitcoin investments “meet the definition of investment contract, and as such, are securities,” the judge added.

Now with the magistrate’s blessing, the SEC can continue with its case against Shavers and his site. With that same ruling, though, the government is for now getting the go ahead for what could lead to the rampant regulation of Bitcoin…